article
Frontier defences breached
7th August 2009
The illicit flow of counterfeit goods costs rights holders billions
of pounds each year. It is prevalent across a wide range of
industries. According to the European Commission more than 1.6
million counterfeit cosmetics and personal care products were
seized at EU borders in 2006 and, with improvements in technology
and an increase in customer demand, the problem is getting worse.
This, together with the established link between the proceeds of
counterfeit sales and the funding of organised crime makes the
recent decision in the case of Her Majesty’s Revenue and Customs v
Penbrook Enterprises Ltd particularly worrying.
Penbrook has effectively reversed the burden of proof in cases
where goods suspected of being counterfeit are detained by Her
Majesty’s Revenue and Customs (HMRC) at the frontier. This shift in
burden means rights holders must now go to court every time they
want to stop counterfeit goods entering the UK market.
Historically, HMRC was prepared to seize items detained at the
frontier after simply receiving a witness statement from the rights
holder confirming that the goods in question were indeed
counterfeit. If the importer objected to their destruction, HMRC
would launch condemnation proceedings in the local Magistrates
Court to determine the counterfeit nature of the goods. This
provided rights holders with an effective and cost efficient
anti-counterfeiting tool.
Following Penbrook it has been decided that existing HMRC
practices did not comply with the EU Customs Regulation.
Specifically, the burden of proof should be on the rights holder to
confirm the goods are counterfeit by taking legal proceedings which
must be initiated within 10 or, with leave of HMRC, within 20 days
of being notified of the goods being detained at the border.
Implications
These changes have the potential to prejudice rights holders,
considerably increasing the burden associated with enforcing IP
rights at the frontier. Recognising that this situation is wholly
unsatisfactory HMRC is currently pushing for legislation that will
provide a simplified procedure. Exactly what this procedure will
entail is still under review.
Until it is implemented, which will not be before October 2009
at the very earliest, rights holders and their legal advisors will
need to work together to minimise the adverse consequences of the
Penbrook judgment.
Given the tight timescales for taking action post notification
of detained goods, rights holders should ensure that suitable
protocols are in place so that their legal advisers can respond
swiftly and efficiently at the relevant time. Browne Jacobson LLP
has been in consultation with HMRC and the Anti Counterfeiting
Group to develop one such protocol. The first case to be operated
under this protocol was successfully resolved at the beginning of
August resulting in the destruction of the counterfeit goods and
recovery of legal costs.
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